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Legal Win for Credit Unions in Field of Membership Challenge

Good news for credit unions! On the radar for the past several years has been the lawsuit against NCUA regarding their rule on field of membership (FOM) for credit unions … hovering in the background and creating a possible BIG cloud on the industry (and a long legal fight at that). This week on August 20th the D.C. Circuit Court of Appeals issued an opinion upholding almost all portions of the NCUA’s FOM rule, which had been challenged by the American Bankers Association.

In the ruling, the D.C. Circuit Court of Appeals overturned a previous opinion by U.S. District Court for the District of Columbia, thereby allowing credit unions to serve Combined Statistical Areas of up to 2.5 million people and rural districts with up to 1 million people. The circuit court left intact the lower court’s holding that allowed credit unions to serve adjacent areas, but asked the NCUA to provide additional explanation for the removal of a requirement to serve the “core” of a Core-Based Statistical Area, which NCUA should be able to remedy by providing additional information to the District Court.

For an idea of the level of importance of this decision … “Today’s decision by the D.C. Court of Appeals upholding almost all portions of the NCUA’s rule is a big win for credit unions,” reads a joint statement by CUNA, NAFCU and the CUNA Mutual Group. “This will have a positive impact for the industry’s 117 mill­­­ion members and American consumers who now have better access to member-owned not-for-profit credit unions.”

The road has been long on this issue … NCUA finalized its CUNA-supported FOM rule in October 2016, and the American Bankers Association sued the agency in December 2016. The U.S. District Court for the District of Columbia ruled in March 2018, upholding two challenged portions of the rule and striking down two provisions. CUNA joined CUNA Mutual Group and the National Association of Federally Insured Credit Unions to file a brief in support of the agency in December of 2019, and in April of 2019 there were oral arguments before a three-judge panel of the D.C. Circuit Court of Appeals, which resulted in the positive decision for credit unions!

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